Here in Canada we are going into RRSP marketing season. RRSP stands for Registered Retirement Savings Plan. If you put savings into one of these plans you don’t have to pay income tax on it. It is taxed when withdrawn, presumably when your income is less and you pay a lower tax rate.

This might be a good time to think out what happens when you make a bank deposit or give somebody a loan.

Money is a tool, or a lubricant, to facilitate the exchange of goods and services. It gives one purchasing power. When you have money you can use it to purchase goods or the labor of another person or persons.

When you hand over some of your money to another person (or institution) you are transferring that purchasing power. When you give it to a financial intermediary, i.e. a bank, that institution passes on your purchasing power, probably along with that of other people. This gives the final borrower a larger amount of purchasing power and the ability to undertake larger projects than any ne person could do by himself.

All this is done in the expectation that the final borrower will make enough profit to repay the loan with interest.

The industry which promotes this process likes to promise depositors fantastic returns. However, there are two things that can go wrong.

First the final borrower may go bankrupt or not make as much money as planned or not enough to cover principle, interest and commissions. In this case the original owner of the purchasing power will take a “haircut”.

The second problem is inflation. A depositor may get his/her money and interest back but if there has been inflation the purchasing power of that money will be proportionately less.

During the years of prosperity with everything going up these problems have not been serious. As we go into recession things may be different.

What about loans to government in the form of bond purchases? The same thing applies except that governments don’t expect to make profits on their spending. If their huge borrowings are to ever be repaid it will have to be out of taxation and user fees or reduced by inflation.

During the hyperinflation in Europe following the first world war a lot of holders of government bonds lost their savings. It appears the current holders of Greek government bonds are going to take a substantial “haircut”.

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Cover Notes

After my first family broke up I went to the University of British Columbia and did a degree in economics because I was intrigued by the way in which money is created and because I wanted to understand the dynamics of how we exchange goods and services.

I concluded economics is mostly about relationships and we should evaluate economic policies by how they contribute to good relationships.

We have two major economic problems with which we should be dealing. The first is that while we have lots of energy and mineral resources left on this planet, we have used up the most easily accessible. Those that are left require an excessive amount of energy to extract. The second major problem is that our so-called "market" economy is largely based on legislation which restricts competition and thus allows some people an unequal share of the agricultural surplus.

To deal with these problems we need to focus our economy on a policy of sharing in the same way that families and people in small-scale societies share their food. We also need a universal guaranteed income scheme AND a new way of creating money. This would be a tremendous transfer of decision-making power from governments and bankers to individuals.

In this book you will learn:

why the economic principles of marginal cost and the elasticity of the demand curve say it should be priced at 99 cents.

why relationships are an important part of economics.

what it takes to make a good relationship.

that our civilization is based upon a huge agricultural surplus which should be considered an inheritance to be shared equally by everyone.

how the financial and the physical aspects of the economy interact.

how money is created out of thin air and the problems this creates for our well being.

how we can finance a guaranteed annual income scheme.

how to become a part of the ten percent,

how not to become a slave.

The list of ebook stores from which you may download this book is at the top of the home page.

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